ERP Adoption: Is it Worth the Investment?

ERP Adoption: Is it Worth the Investment?

Jorge A. Romero (Towson University, USA)
DOI: 10.4018/978-1-4666-2193-0.ch009
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Abstract

Enterprise Resource Planning (ERP) has been a major investment for most companies since the early nineties. ERP is a type of investment that has an integrated approach, and has been widely adopted, but there is little empirical evidence about how ERP implementation affects company performance. This chapter begins with the discussion of ERP investment and its role as a commodity or as a strategic investment. Then follows a discussion of an industry in which companies have invested enormous amounts of money on ERP. Finally, in spite of the growing dominance of ERP systems, there is still little empirical evidence on the type of benefits that companies get from an ERP implementation. Therefore, it is important to understand the effects of ERP in cross-functional systems.
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Accelerated Implementation Versus Traditional Implementation

It is well-known that as implementation of ERP begins, managers anticipate the organizational changes necessary to successfully implement and use the ERP, and they begin making these changes. Thus, some types of organizational benefits of the implementation surface early. It is necessary to understand the different types of organizational benefits to know which organizational benefits might surface during ERP implementation and which are likely to surface later. Further, some types of benefits, such as low cost of operations, are largely internal to the organization, i.e., do not depend on the actions of competing organizations. Other types of benefits, such as profitability, depend on the actions of competing organizations. For example, is the competitor also installing a superior enterprise system so that profits, if any, that the enterprise system bestows have to be shared? Such a view of organizational benefits from ERP first implies that the implementation of an ERP by one organization must not be viewed in isolation, but the implementation of similar ERP by other companies must be considered as well. It also implies that the typology of organizational benefits must be coherent in an accounting sense so that the true pattern of rise, fall and trade-off between benefits are visible in the analysis.

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